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N‘ch igﬂayﬁﬁﬁﬁ g (8 points) The stock of Ben Corporation sells for 250 per share today and does not pay a
dividend. The annual effective risk free interest rate is 4%. Elaine purchases a two year straddle
on Ben Corporation. You are given the following call prices for two year calls on Ben Corporation. Remember that if
you need put prices that those can be found using the Put Call Parity formula. _ Calculate the maximum loss that Elaine could incur.
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i /‘ 17. (4 points) You enter into a bear spread by buying a one year call with a strike price of 105 and selling short a call with a strike price of 95. The premium for the call with a strike of 105 is 3.00
and the premium for the call with a strike of 95 is 6.00. The annual effective risk free interest rate is 4%. Calculate the range of spot prices at expiry for which this bear spread will have a positive profit. M
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 Fall '08
 Staff
 Math

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